Enhanced Oil Resources Inc. has provided the following update regarding the company's operations results for the second quarter of 2013.
The company's key business objectives for 2013 are to continue its focus toward increasing oil production and oil reserves at the Crossroads and Milnesand oil fields; to further evaluate the infill potential at the Chaveroo oil field; to further the permitting and potential construction of the Cortez to Milnesand pipeline connecting Kinder Morgan's Cortez carbon dioxide pipeline to its Milnesand and Chaveroo oil fields by September, 2015; and to continue the company's successful compliance activity across its oil fields.
Oil production during the second quarter of 2013 has averaged 403 barrels of oil per day (bopd). At the company's Crossroads field, oil production has averaged 257 barrels of oil per day during the second quarter. At the Milnesand field, oil production for the second quarter of 2013 has averaged approximately 88 bopd, similar to averages from last quarter. After 10 months of oil production from the recently drilled MSU No. 141 and No. 522 wells, production continues at approximately 20 bopd, a slight decrease from the 22 bopd rates announced in May.
Crossroads update
Crossroads production has averaged approximately 257 bopd with two wells currently shut in pending resolution of water-handling issues. A workover rig is currently on location at the Crossroads No. 106 well and is preparing the well for conversion to a second water injector. The company expects to have this work completed within the next week or so and expects to increase its water-handling volumes shortly thereafter. As previously disclosed, two wells are currently shut in pending additional water-handling capacity. It is anticipated that these shut-in wells could add another 100 bopd to the production levels.
The 12-square-mile, three-dimensional seismic survey planned for Crossroads field has been acquired, and interpretation of that data is continuing. The seismic survey is intended to delineate potential infill locations at the Crossroads field, improve structural mapping and fault locations, and contribute to the further evaluation of shallow production previously encountered in the field.
Milnesand update
After approximately 10 months of production from the recently drilled MSU No. 141 and No. 522 lateral wells, the company continues to see a consistent production trend. Based on current rates of production, it expects to end the initial 12-month production period at approximately 18 bopd per well, which is within the company's predrill expectations and considerably higher than the original vertical wells drilled to develop the field over 40 years ago. The company continues to monitor well and service costs to refine the economics of this play and confirm the need for the future utilization of lateral wellbores in the upcoming CO2 development project.
The advanced petrophysical analysis within the Milnesand field, discussed in the May update, has been completed, and information collected from this study is now being incorporated into continuing engineering studies to assess and identify potential water flood optimization opportunities that can be executed in 2013/2014 prior to the implementation of CO2 flood operations. This work will involve such activities as pattern-by-pattern cross-section alignment opportunities, injection rate adjustments and pump upgrades.
In-depth engineering studies regarding lateral application within the Milnesand field are expected to be completed by the beginning of the fourth quarter of 2013.
Cortez to Milnesand CO2 pipeline update
The company recently completed survey efforts on the proposed CO2 pipeline connecting Kinder Morgan's Cortez line to the company's Milnesand and Chaveroo oil fields. Final survey results indicate a revised pipeline length of approximately 38 miles. Updated cost estimates suggest that the pipeline can be constructed for approximately $18-million, assuming current steel prices. The company will proceed with the necessary federal and state permitting work in 2013, and expects to begin purchasing rights of way in 2014. Delivery of CO2 to the company's proposed pipeline is scheduled to commence no later than September, 2015.
Chaveroo update
Testing of the P3 interval was completed in two wells located within the Jennifer unit of the Chaveroo field. The zones were perforated and acid stimulated, followed by swab testing. P3 production results were below expectations, and the company has moved the recompletion effort to focus on restimulation of the P1/P2 intervals using state-of-the-art fracturing technology. The company anticipates moving forward with the first refracturing in the third quarter of 2013.
Agreed compliance order (ACO)
In June, 2013, the company received approvals from the New Mexico Oil Conservation Division for the next six-month compliance period. Pursuant to that order, the company has obtained approval to drill three lateral wells and convert a number of existing production wells in the Milnesand field to injectors. These conversions will support the company's upcoming CO2 development project. In addition, a number of wells in Milnesand are being reactivated during this six-month period, and the MSU No. 311 well has been plugged in accordance with the ACO.
Staffing
The company is pleased to report that, as of July 1, 2013, Mark Peavy has been promoted to the newly created position of chief operating officer (COO), and is now responsible for all production and development activity within the company.
Barry Lasker states: "I would like to congratulate Mark on a job well done since joining EOR earlier this year. The promotion to COO is testimony to his hard work and experience. I am looking forward to working with Mark in this capacity as we grow our production and reserves. It is also pleasing that we have a rig on location to convert the Crossroads No. 106 well to our second water disposal well. The completion of this workover will enable further production growth at Crossroads by re-entering additional wells and targeting other zones within our leases.
"The company continues the process of implementing our Milnesand CO2 flood by September, 2015. We are continuing with subsurface evaluation and surface facility designs, and expect to have these studies completed later this year. Our oil production is holding steady, and we expect further increases in daily oil production will continue once our second water injector at Crossroads is on line."